AssetMark adds $2.8B in assets, reaches record revenue and profit

After closing a big acquisition and recording its third straight quarter of a record in-flow of assets, AssetMark is seeking to expand further by competing against fellow platforms and RIA aggregators for business among small practices.

The turnkey asset management program and outsourced investment technology firm has generated higher adjusted earnings in the first nine months of the year than it did for all of 2020, CEO Natalie Wolfsen told analysts in a call after the Concord, California-based firm disclosed its quarterly earnings on Nov. 9. AssetMark works with more than 8,500 advisors in practices of all sizes, and Wolfsen sees opportunity among advisory firms with fewer than $500 million in client assets where the owners don’t wish to sell to a consolidator, she said in an interview.

“They have unique challenges, and they’re challenges that AssetMark invests a lot of time and resources in helping them meet,” Wolfsen said.

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Advisors on the platform: Custodians have “much, much higher minimums for the same level of service and the same level of support” to smaller practices as AssetMark, she told analysts a day earlier, according to a transcript by Motley Fool. With respect to other competitors for the business, broker-dealers have more required proprietary solutions and aggregators buy firms outright rather than just serving as the platform, Wolfsen said. The total advisors working with AssetMark rose by a net 79 representatives, or 1%, year-over-year to 8,552, while the amount defined by the firm as “engaged advisors” with at least $5 million across its platforms surged by 15%, or 351, to reach 2,749. Over 6,500 new households and 201 new producing advisors came to the platform in the third quarter, pushing the number of client families to 203,004. Voyant, a planning and wellness tech firm that AssetMark acquired for $145 million on July 1, spans more than 20,000 advisors in the United Kingdom, Canada, Ireland and the U.S.

Platform assets: The client assets managed on AssetMark’s platform soared by 29% year-over-year to $86.83 billion, with a new high mark of $2.83 billion in quarterly flows. At $79.67 billion, the engaged advisors are responsible for 92% of the assets on the platform. Besides the addition of new advisors, the existing ones are boosting their business at a higher clip than they were in the year-ago period: Production lift, a measure of the annualized organic growth of the practices, soared by 500 basis points to 23.7%. While the firm has integrations with every major custodian, its own assets under custody surged by 37% to $65.66 billion. In addition, AssetMark Institutional received approval in the quarter from “a leading custodian’s RIA referral program” to participate in the business, Wolfsen noted in her prepared remarks. In the interview, she declined to identify the custodian.

Bottom line: AssetMark set records on the top and bottom lines in the quarter, with the company surpassing $100 million in net revenue for the first time, according to Wolfsen. The company earned net income of $12.2 million on total revenue of $140 million after capital spending of $9.3 million. The GAAP profit jumped by 43% year-over-year in the third quarter, while the income climbed 30%. In terms of non-GAAP financial metrics, AssetMark’s adjusted net income grew 65% to $29.9 million and its adjusted EBITDA expanded 53% to $44.8 million. The adjusted EBITDA margin went up 460 basis points from the year-ago period to 32%.